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Six gold juniors with a resource of more than 10-million ounces

Marc Davis Marc Davis, www.Capitalmarketsmedia.ca
0 Comments| May 26, 2010

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Latin America represents the world’s last great mineral frontier for prolific gold discoveries due to its vast land mass and its geologically fertile terrain. This is proving to be a godsend for some lucky investors, while others have seen their luck turn to shattered dreams.

Such drama all began with the Spanish Conquistadores, who failed in their efforts to locate the fabled Eldorado (“the golden one”) – a mythical lost city brimming with golden riches. However, a peaceful modern-day invasion of intrepid gold seekers is breathing new life into the world’s greatest ever treasure hunt – and they’re proving that there’s some truth to Eldorado’s lustrous legend.

Armed with large amounts of cash, sophisticated technology and shrewd geological acumen, a handful of small-to-large-sized mining companies are finally revealing the secret to finding South America’s most prolific gold riches. All of which are clustered either in the northern territories of the continent or in its southern reaches, rather than conveniently concentrated in one Eldorado-like location.

Several of the world’s largest gold miners are at the forefront of this epic “New World” gold rush. The ranks of the various other hopefuls are mostly made up of small boom-or-bust gold exploration/development juniors. A select few have already hit the geological jackpot.

They include the Canadian gold junior Aurelian Resources. It made the headline-grabbing Fruta del Norte gold discovery in Ecuador in 2006. Thanks to this high-grade 13.7-million-ounce deposit, the company’s share price skyrocketed from around 25 cents to over $40. This was before the deposit was purchased in 2008 by the mining heavyweight Kinross Gold Corp. (TSX: T.K, Stock Forum) / (NYSE: KGC, Stock Forum) for the princely sum of $1.2 billion.

To date, a total of six other gold juniors have each found world-class gold deposits, weighing-in at 10 million ounces or better. Unfortunately, three of these lustrous projects are in Venezuela, which is proving to be fraught with major political risk for asset-rich gold companies. And just last month, unforeseen political events in Columbia essentially derailed a fourth company. More on all of this later.

That leaves Chile, where two major gold finds are shaping up nicely without any political bumps in the road – so far. They include what is arguably the most promising of all of Latin America’s gold-copper discoveries of the past couple of decades – the huge Caspiche deposit.

Owned by Exeter Resource Corp. (TSX: V.XRC, Stock Forum) / (NYSE-A: XRA, Stock Forum ), the Caspiche gold-copper deposit in northern Chile’s prolific Maricunga gold belt is a veritable monster that weighs in at 24.3 million gold ounces. This figure entails resources in the largely reliable but not definitive “indicated category,” as well as the more approximate “inferred category.”

The deposit is situated at the heart of the ruggedly mountainous Maricunga gold corridor, where over 100 million ounces of gold is concentrated and is mostly owned by mining heavyweights Barrick Gold (TSX: T.ABX, Stock Forum) / (NYSE: ABX, Stock Forum), Goldcorp Inc. (TSX: T.G, Stock Forum) / (NYSE: GG, Stock Forum) and Kinross Gold. Only the Cerro Casale gold mine in-the-making is still larger than Caspiche. Jointly owned by Barrick and Kinross, this monster deposit boasts a 26.4-million-ounce gold resource. But Caspiche is still growing in size (due to continued drilling success) and its management suggests that the company has yet to define the limits of the discovery.

Andina Minerals (TSX: V.ADM, Stock Forum) is the other mining junior that is also making solid headway in the Maricunga gold belt. Its Volcan Gold Project, which consists of three closely-grouped deposits, add up to 9.77 million ounces in the very reliable “measured and indicated category,” as well as a further 768,000 ounces in the inferred category. These deposits – which could all be encompassed into a single mining operation – are still getting larger, according to Andina Minerals president George Bee.

Second in size only to Exeter’s Caspiche deposit among the six gold juniors is the 16.8-million ounce Las Cristinas deposit in Venezuela. This controversial world-class gold discovery is owned by Toronto-based Crystallex International Corp. (TSX: T.KRY, Stock Forum) / (NYSE-A: KRY, Stock Forum).

Unfortunately for the company’s shareholders, the project’s development was stopped dead in its tracks in mid 2008 by the left-wing, anti-capitalism government of political firebrand Hugo Chavez. The company was ready to build a low-cost 250,000 ounce a year mine. In late 2009, the company reported that it was still at an “impasse” with regards to the Venezuelan government’s refusal to issue it an environmental permit. Crystallex’s share price has been in the doldrums for nearly 18 months, at a fraction of its former valuations.

Another victim of Chavez’s capricious government is Spokane, Washington-based Gold Reserve Inc. (TSX: T.GRZ, Stock Forum) / (NYSE-AMEX: GRZ, Stock Forum). Its Brisas project hosts 11.8 million ounces of gold and approximately 1.6 billion pounds of copper in the measured and indicated category, and 2.28 million ounces of gold and 316 million pounds of copper in inferred category. Over the past 17 years, the company has invested over $300 million in what constitutes one of the world’s largest undeveloped gold-copper deposits.

Gold Reserve was on the verge on commencing mine construction when it too was “arbitrarily” thwarted in early 2008 by Venezuelan authorities, according to the company. The company’s share price has languished ever since then and its frustrated management is pursuing an international arbitration claim against Chavez’s administration.

Another setback for the junior gold sector came just several weeks ago when Vancouver-headquartered Greystar Resources (TSX: T.GSL, Stock Forum) found itself suddenly stymied in its bid to make a lucrative mine out of its Angostura gold-silver deposit in Columbia.

With a resource totaling about 11.55 million gold ounces in the measured and indicated category and a further 3.37 million ounces in the inferred category, this is a major setback for a project that has been 15 years in the works. Unexpected changes in Columbia’s mining code have placed much of Greystar’s gold resources off-limits as they encroach on an environmentally-sensitive area. Greystar’s share price has also taken a precipitous tumble over recent trading sessions.

The last of the select small group of gold juniors in South America with 10-million-ounce-plus gold resources is Vancouver-based Rusoro Mining (TSX: V.RML, Stock Forum). An already established gold producer in Venezuela, the company has mitigated much of the political risk there by partnering up with the regional government of Bolivar State for its producing Isidora mine – the larger of its two mines. The company’s proximal properties in the El Callao and El Dorado gold districts benefit from collective resources of 7.1 million ounces of gold in the measured and indicated category and a further seven million ounces in the inferred category.

All of these emerging gold deposits represent rich veins of opportunity for supply-hungry major gold producers that are beginning to circle around prospective takeover targets. This is especially the case as the relative scarcity of world-class gold discoveries in recent years is already taking a toll on the mining industry’s bottom line. Global gold output has been dwindling by nearly 5% per annum since it peaked in 2001, even though bullion’s spot price has virtually quadrupled since then.

Disclosure: Marc Davis and the principals of BNWnews.ca do not own shares directly or indirectly in any of the companies mentioned in this article.



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